Why is the University seeking changes to the pension plan?

With the current pension plan design the University as the plan sponsor is responsible for any funding shortfalls that develop when the valuations are conducted on the plan. Currently, the pension plan is not funded on a Going Concern basis or on a Solvency basis and has a current service shortfall. As a result the University must begin funding these shortfalls in 2010 when the next valuation must be filed. The only way for the University to relieve its funding obligations is to amend the plan design to either reduce pensions on a go forward basis or increase employee contributions beyond the current level or a combination of both.

What is a Solvency Shortfall?

When the cost of pension liabilities based on the assumption that the plan was wound up on the date of the valuation. Specifically they calculate all plan members cost of pension and determine if the amount of assets in the pension plan are sufficient to pay out all these obligations. A solvency shortfall exists whenever the assets in the pension plan are less than what is required to fund all of the solvency obligations.

What is a Going Concern test?

An estimate of the present and future cost of benefits for all existing members of the pension plan projected forward in time. Some of the key factors considered are life expectancy (mortality), age of retirement, investment returns and projected salary increases.

How is a Current Service Shortfall determined?

Current Service Shortfall exists when the cost of pensions is greater than the amount of contributions being paid into the pension plan measured on an annual basis.

What is a Contribution Holiday?

When the employer uses pension plan surplus to fund ongoing pension obligations created by a current service shortfall or in cases where the pension fund has reached the maximum surplus levels permitted by legislation (10 % currently).

What is an Accrued Pension Benefit?

Accrued Pension Benefit is the amount of pension earned by a member within the pension plan based on a calculation using their years of service and some measure of their earnings (eg. average of best five years wages).

I recently requested my retirement information from Staff Benefits and my estimate of pension is now lower than the calculation I received a year ago. Why has my pension calculation changed?

There are two main reasons for the change in the pension calculation Mortality costs and investment returns. The university actuary has increased the cost of pension by increasing his estimate of costs for life expectancy (plan members are living longer than previously estimated). The second change the lack of investment returns earned by the pension funds. Your pension funds are partially invested in the markets and resulting from this your individual accounts were effected by the financial market losses in the fall of 2008 . Current pension estimates in some cases have been reduced by up to 30%.

Can the University change our pension plan and reduce the amount of pension we receive?

Any current pension you have earned is protected by the Pension Benefits Act of Manitoba and prohibits the reduction of an individuals accrued pension benefit. The only changes permitted would be changes to the assumptions used by the Actuary when conducting a valuation of the pension plan. However, future pension benefits are not guaranteed and could be effected if all the stakeholders of the pension plan were to agree to changes to the plan.